Market Opening and Stock Market Behavior: Taiwan’s Experience

Abstract

This paper studies the impact of market opening on stock market behavior. Taiwan_x000D_ opened its stock market in January 1, 1991. Using stock market data from Taiwan for both_x000D_ before and after the opening event, we found that while there is no significant changes in the_x000D_ stock mean returns, volatility is significantly reduced three months after Taiwan opened its_x000D_ stock market. As a result, the market efficiency, as measured by the Sharpe ratio, significantly_x000D_ increases three months after the opening event.